A bit confused about this: I understand its 0.2% /month up to 30 months = 6% for the first 30 months …is it then 6% per month from there on??? Or flat 6% for 30-360 months? For example in month 32 CPR = (0.2%*30)+6%=12% annual prepayment = 1-(1-.12)^(1/12) = 1.06% prepayment per month for month 32? Is this correct? Thanks
It stops at 6% and stays flat after it reaches 30 months.
I thought so, cause per month would not make sense…
Under the base model assuming a prepayment factor (forget what they call it, PSA or something of 100) its as you said, leveling off at 6%. If the PSA is any other level say 300, you multiply the CPR you arrive at for any period including the flat period by 3 in this instance so a PSA of 300 would put you at a CPR of 18% in the level period.